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MARITIME SHIPPING HAWAII - ZONE OF REASONABLENESS - ACT 213

The Zone of Reasonableness in theory and prescribed by the Interstate Commission Termination Act of 1995 was to streamline the regulatory process for the Surface Transportation Board.

In practice, the Zone of Reasonableness has proven to be a haven for shipping companies seeking tariff increases. Any tariff increase within the range is presumed reasonable. The Surface Transportation Board does not otherwise require supporting data or make any inquiry.

The Zone of Reasonableness was implemented in Hawaii on a trial basis. The Hawaii Public Utilities Commission terminated the program finding the Zone of Reasonableness to be inconsistent with the public interest. The Hawaii Public Utilities Commission, unlike the Surface Transportation Board, scrutinized each application for tariff increase and determined whether the supporting data was sufficient to warrant approval of the tariff increase.

Act 213 has withstood judicial challenge. Act 213 provides the Hawaii Public Utilities Commission an additional tool to govern intrastate water borne transportation of goods within the Port of Hawaii system to ensure that all islands are treated equally. Any exception is to be granted in rare instances at the discretion of the Hawaii Public Utilities Commission.

This guarantees Foss (division of Saltchuk) a perpetual monopoly as they have an ability to manipulate costs (via pricing of services from the Saltchuk parent organization) to ensure 'rate of return' never goes above 12%. It may be unconstitutional as restraint of trade.

4.
STB
ZONE OF REASONABLESS
(1) IN GENERAL. — For purposes of this section, a rate or division of a motor carrier
for service in noncontiguous domestic trade or water carrier for port-to-port service
in that trade is reasonable if the aggregate of increases and decreases in any such
rate or division is not more than 7.5 percent above, or more than 10 percent below,
the rate or division in effect 1 year before the effective date of The proposed rate or
division.
(2) ADJUSTMENTS TO THE ZONE. — The percentage specified in paragraph (1) shall
be increased or decreased, as the case may be, by the percentage change in the
Producers Price Index, as published by the Department of Labor, that has occurred
during the most recent 1-year period before the date the rate or division in question
first took effect.

5.
YOUNG BROS.
APPLICATION TO HPUC - ZONE OF REASONABLENESS
In concept, the practice will be similar to the federal procedure authorizing interstate
water carriers regulated by the Surface Transportation Board to file for a rate change
provided it is within a zone of reasonableness without having to secure Board
approval each time a rate change is sought. See 49 USC 13701.
Competition has drastically increased over the past several years primarily from the
interstate carriers, including two potentially new interstate carriers entering the
Hawaii market in the next few years. These carriers are not regulated by the
Commission but are loosely regulated by the Surface Transportation Board, under
the U.S. Department of Transportation. This Application will enable YB to compete
more effectively by leveling the playing field for all carriers transporting to the
Neighbor Islands.
Hawaii State PUC Docket No. 2001-0255 [Emphasis Supplied]

6.
Hawaii State PUC Decision
YOUNG BROS.
APPLICATION - ZONE OF REASONABLENESS
THE COMMISSION ORDERS:
The Zone of Reasonableness Program for Young Brothers is
terminated, effective from the date of this Order, as inconsistent
with the public interest.
HPUC Docket No. 2001-0255 [Emphasis Supplied]

7.
STB
WATER CARRIER REGULATION
• STB has authority over carriers operating between
Hawaii and the US 48 states.
• STB has no authority over carriers operating solely
within the noncontiguous states or territories
themselves.

8.
Hawaii State PUC
WATER CARRIER REGULATION
The Commission regulates four water carriers: Young Brothers, Limited
(“Young Brothers”), a provider of inter-island cargo service between all
Major islands; Sea Link of Hawaii, Inc. (“Sea Link”), a passenger and cargo
carrier providing water transportation services between the islands of Maui
and Molokai; Hone Heke Corporation (“Hone Heke”), a passenger and cargo
carrier providing water transportation services between the islands of Maui
and Lanai; and Pasha Hawaii Transport Lines LLC (“Pasha”), a provider of
cargo Service between the ports of Honolulu, Kahului, and Hilo with
Authorization to make calls to Nawiliwili, Barbers Point, and Pearl Harbor
upon a customer’s request.

9.
YOUNG BROS. – MATSON - HORIZON
Horizon and Matson cargo moving on Young Bros. is not subject to Hawaii
State PUC regulation.
Horizon does not have its own interisland vessels and uses Young Bros. to
transship virtually all its neighbor island cargo.
Matson operates an interisland (intrastate) fleet of three barges, which
includes two container barges and one Ro/RO barge. Matson moves most
of their neighbor island cargo on their own equipment.
The Hawaii Shippers Council, 2013

10.
MATSON CARGO MOVED
INTER-ISLAND, INTRASTATE
ON MATSON EQUIPMENT
IS SUBJECT TO REGULATION BY
HAWAII STATE PUC

11.
Matson has no Tariff for
Inter Island, Intrastate
Water Carrier Service Filed
and Approved by The
Hawaii State PUC
INFORMATION CURRENT AS OF: January 21, 2014

12.
ACT 213
The commission shall not make a finding of public
convenience and necessity nor issue a certificate if the
evidence in the record indicates that the issuance of
the certificate would diminish an existing water
carrier's ability to realize its allowed rate of return or
if the certificate would allow an applicant to serve
only high-margin or high-profit ports or lines of
service that are currently served by an existing carrier.
Governor Neil Abercrombie, July 11, 2011, Act 213, effective as of July 1, 2011

13.
ACT 213
APPLIES TO
ALL APPLICATIONS FOR
INTER-ISLAND WATER
CARRIER SERVICES
FILED AFTER JULY 1, 2011